Links Group’s business model was similar to that of many other company formation specialists in Dubai when it was launched in 2002.
But it soon spotted an opportunity to do something different.
“Initially, we were purely consulting and advisory. Then it soon became clear that we needed to offer some practical assistance as well as advice,” says John Martin St Valery, the founding partner of the Links Group of Companies.
Currently, expatriate owners of companies in free zones maintain full control of their businesses, without exception.
But UAE law normally requires that a businessoperating in an emirate but not based in a free zone have a local sponsor owning at least 51 per cent of the company’s shares.
Links Group gets involved in this process by running a company that acts as the local sponsor so that the expatriate entrepreneur can retain full control of his or her venture. In other words, says Mr St Valery, “we are the local company, as well as the consulting service”.
“It’s quite an unusual model,” he says.
Under this arrangement, the Emirati interest and the expatriate involved pay a flat fee to Links Group for acting as their middleman.
But is this kind of set-up allowed?
“Absolutely,” says Mr St Valery.
About 250 companies – including branches of large multinationals, standalone businesses and one-person consultancies – operate under the scheme in the UAE and Qatar. Other foreign companies often enter into side agreements with local partners in which the UAE national agrees to hold the majority shares in exchange for a fixed fee to stay out of the daily running of the business.
“I am told the vast majority of companies in Dubai are run on this model,” says Christopher Dixon, a partner in the international law firm Taylor Wessing, which has its Middle Eastern offices in Dubai.
A law published in 2004 appeared to target such side agreements by prohibiting a UAE national from allowing an expatriate partner to use his or her own name, instead of the Emirati’s, on the business licence. While it was initially supposed to be enforced in 2007, implementation was postponed until 2009.
“About six months ago, there was some sort of order to say it has been postponed indefinitely,” says Mr Dixon.
“It won’t come into effect in the foreseeable future,” he adds. “One would like to think that it was a tacit acknowledgment that the authorities do accept that these arrangements [exist].”
Mr St Valery argues that another advantage to these arrangements involves succession planning.
If the local partner were to die, for example, the expatriate might have to re-establish the business, or the heirs or successors of the local partner may want to change the original agreement.
“The contractual arrangement remains in place,” says Mr St Valery.
He also argues that Emirati owners of sponsorship companies can benefit since they receive a fee for each of the companies operating under the scheme, with Links vetting companies on their behalf.
“We have a dual role at Links, which is protecting the [expatriate’s] assets,” he says. “And we have a duty of care to the local partners to make sure they’re not taking on undue risk.